question archive Suppose a firm is currently employing 20 workers, the only variable input, at a wage rate of $60
Suppose a firm is currently employing 20 workers, the only variable input, at a wage rate of $60
Subject:EconomicsPrice:3.86 Bought6
Suppose a firm is currently employing 20 workers, the only variable input, at a wage rate of $60. The average product of labor is 30, the last worker added 12 units to total output, and total fixed cost is $3,600 and the firm's marginal cos at the current level of output is $5.
1. How much output is the firm currently producing?
2. At the current level of output, what is the firm's total variable cost?
3. At the current level of output, what is the firm's average variable cost?
4. At the current level of output, what is the firm's total cost?
5. At the current level of output, what is the firm's average total cost?
6. Choose the response from parenthesis to complete the sentence about the firm's average variable cost
The firm's average variable cost (is equal to | is greater than | is less than) the firm's marginal cost and so we can say the firm's average variable cost (is at a maximum | is at a minimum | is decreasing | is increasing)
7. Choose the response from parenthesis to complete the sentence about the firm's average total cost
The firm's average total cost (is equal to | is greater than | is less than) the firm's marginal cost and so we can say the firm's average total cost (is at a maximum | is at a minimum | is decreasing | is increasing)
8. Consider that the market price is $7. Is the firm producing at its profit-maximizing level of output? Enter a numerical value and choose the response from parenthesis to complete the sentence.
Given the market price of $7, at the firm's current level of output, the value of the firm's marginal product of labor Numerical Value and this (is equal to | is greater than | is less than) that the current wage rate. The firm (is | is not) producing at its profit-maximizing level of output.
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1. Output firm is currently producing
= No of workers * Average product of labor
= 20 * 30
= 600 units
2. At the current level of output, firm's total variable cost
= No of labors * wages
= 20 * $60
= $1200
3. At the current level of output, firm's average variable cost
= Total variable cost / Output
= $1200 / 600 units
= $2
4. At the current level of output, firm's total cost
= Total variable cost + Total fixed cost
= $1200 + $3600
= $4800
5. At the current level of output, firm's average total cost
= Total cost / Output
= $4800 / 600 units
= $8
6. Choose the response from parenthesis to complete the sentence about the firm's average variable cost
The firm's average variable cost is less than the firm's marginal cost and so we can say the firm's average variable cost is increasing
- Because MC intersects with AVC at lowest. Once MC is above AVC, AVC will be increasing
7. Choose the response from parenthesis to complete the sentence about the firm's average total cost
The firm's average total cost is greater than the firm's marginal cost and so we can say the firm's average total cost is decreasing
- It means MC is below ATC and ATC is falling
8. Consider that the market price is $7. Is the firm producing at its profit-maximizing level of output? Enter a numerical value and choose the response from parenthesis to complete the sentence.
Given the market price of $7, at the firm's current level of output, the value of the firm's marginal product of labor Numerical Value and this is greater than that the current wage rate. The firm is not producing at its profit-maximizing level of output.
Value of MRPL
= Price of good * MPL
= $7*12
= $84
Current wage is $60
Value of MRPL should be equal to wages for profit maximization
Step-by-step explanation
Labors = 20
Wages = $60
APL = 30
MPL = 12
Fixed cost = $3600
MC = $5
AVC = $2
ATC = $8
